Hospital Spending Drove 40% of US Health Cost Growth (2022-2024)
National health spending continues its upward trajectory, reaching $5.3 trillion in 2024 – representing 18% of the nation’s Gross Domestic Product (GDP). This growth impacts costs for families, employers, and government programs like Medicare and Medicaid. In 2025, employer-sponsored family health insurance premiums averaged $26,993 annually, with employees contributing $6,850. A significant portion of this spending – nearly one-third in 2024 – is allocated to hospital care, which has more than doubled in cost over the past two decades.
The Rising Cost of Hospital Care
Between 2022 and 2024, national health expenditures increased by $692 billion. During this period, hospital care accounted for a substantial $277 billion of that increase – 40% of the total growth in national health spending. Here’s a larger share than any other health spending category. Hospital spending represented nearly 30% of all national health expenditures in 2022 and grew at a faster rate than overall health spending in both 2023 (10.6% versus 7.4%) and 2024 (8.9% versus 7.2%).
According to the centres for Medicare & Medicaid Services (CMS), the recent growth in hospital spending is largely attributable to a rebound in service utilization following a period of suppressed demand during the COVID-19 public health emergency. However, hospital prices also contributed to the increase, growing by 2.7% in 2023 and 3.4% in 2024 – the fastest rate of price growth since 2007. These prices encompass costs for Medicare, Medicaid, and commercial insurance, with commercial prices generally increasing at a faster pace.
Spending Beyond Hospitals
While hospital spending led the way, other categories also contributed to the overall increase. Physician and clinical services accounted for 22% of the growth, while retail prescription drug spending contributed 11%. Spending on other areas, including non-medical insurance, home health care, and dental services, represented smaller shares. Notably, government public health activities saw a 7% decline, likely due to the winding down of pandemic-related initiatives.
From 2022 to 2024, hospital spending grew 20%, outpacing the 15% growth in total health spending. Other areas experiencing faster growth included retail prescription drugs (20%), other professional services (25%), home health care (23%), and government administration (24%).
Looking back further, from 2005 to 2024, hospital spending accounted for 32% of the overall increase in national health spending. Physician and clinical services contributed 22%, and retail prescription drugs accounted for 8%. CMS projects that hospitals will account for a similar 32% share of spending growth through 2033, a slight decrease from the recent 40% share.
A Decade of Growth
Hospital spending has risen dramatically over the past two decades, increasing from $609 billion in 2005 to $1.6 trillion in 2024 – a $1.0 trillion increase. Total health spending grew by $3.3 trillion during the same period, from $2.0 trillion to $5.3 trillion. More recently, hospital spending increased by $277 billion between 2022 and 2024.
This growth in hospital spending has outpaced increases in other areas, including physician services and prescription drugs. As a percentage of GDP, hospital spending increased from 4.7% in 2005 to 5.6% in 2024, while total health care spending rose from 15.5% to 18.0%. CMS projects that hospital spending will reach 6.4% of GDP by 2033, with total health expenditures reaching 20.3%.
The increase in hospital spending is driven by both rising prices and an increased volume of services, particularly outpatient care. While total hospital inpatient days decreased by 5% between 2005 and 2024, outpatient visits increased by 44%. This continued growth in hospital spending is expected to contribute to higher costs for public programs, employers, and families, and may exacerbate existing concerns about health care affordability.
Frequently Asked Questions
What percentage of national health spending is attributed to hospital care?
In 2024, hospital care accounted for nearly one-third of national health expenditures.
What factors contributed to the growth in hospital spending between 2023 and 2024?
The growth was primarily due to a rebound in service utilization following the COVID-19 public health emergency, as well as increases in hospital prices.
What is CMS projecting for hospital spending growth through 2033?
CMS projects that hospitals will account for 32% of the overall increase in national health spending growth through 2033.
As healthcare costs continue to rise, what role do you believe innovation and policy changes will play in shaping the future of hospital spending?